Taxes on SaleConsider the sale of a property with the following information provided: An office property was acquired three years ago for $1.25 million. Out of the total acquisition price, 85% was attributed to improvements. Over the holding period, 7.5% of the initial acquisition price was spent on CAPEX. The property was then sold for $1.56 million, with 3% selling expenses. At the point of sale, the outstanding mortgage balance was $546,000. Assume that the capital gains tax is 15%. Show all work.

(a)Find the adjusted basis required to calculate the tax liability from the sale. (1 point)

(b)Find the total tax liability on the sale. (2 points: 1 for capital gains tax, 1 for depreciation recapture)

(c)Find the after-tax equity reversion from the sale. (2 points: 1 for BT reversion, 1 for AT reversion)

Answer rating: 100% (QA)

a Adjusted Basis Step 1 Calculate the cost of land and building separately Cost attributed ... View the full answer